Thu, Mar 08, 2018 - Page 12 News List

Advantech raises prices for first time

By Lisa Wang  /  Staff reporter

Advantech Co (研華), the world’s largest industrial computer supplier, has raised prices for the first time ever to lift its profit margin amid rising component prices, the company said yesterday.

An increase of 8 percent in key component prices last quarter eroded NT$270 million (US$9.23 million) in the firm’s gross profit and brought its gross margin down to 38.8 percent, Advantech said.

For the whole of last year, gross margin shrank to 39.2 percent, below the company’s long-term target of 40 percent.

“We did not pass on cost increases to our clients, as we had not previously set up a mechanism to raise prices,” Advantech chairman K.C. Liu (劉克振) told an investors’ conference. “We have to fix that this year.”

Advantech has raised the prices of its standard products to cover the higher costs of key components, central processors and memory chips.

Standard products constitute 60 percent of its total revenue, while custom-made products make up the remaining 40 percent.

With the price hikes, Advantech said it hopes to maintain its gross margin at about 40 percent this year.

Besides rising component costs, an unfavorable product mix and strong local currency also weighed on its gross margin last year, the firm said.

However, Advantech officials are positive about this year.

“We aim to grow net profit by a double-digit percentage this year. The growth will ride on the Internet of Things [IoT] trend,” Liu said.

Net profit for last year grew 8.5 percent year-on-year to NT$6.15 billion, with earnings per share of NT$8.84, according to the firm’s financial statement.

High-margin industrial IoT devices would be one of the strongest growth drivers this year, as manufacturers in Europe, the US and China are stepping up their factory automation efforts, Liu said.

“We believe US President Donald Trump’s ‘Made in America’ policy and tax cuts will bring more businesses to us,” Advantech board director Chaney Ho (何春盛) said.

The industrial IoT device business in the US grew 24 percent last year, Ho said.

In addition, China’s Silk Road Economic Belt, and Belt and Road initiatives would help spur demand for industrial IoT devices from Chinese clients, he added.

Greater China was the biggest revenue source for Advantech last year, accounting for 32 percent of revenue, ahead of the US market’s 28 percent.

In Europe, revenue is to grow 15 to 20 percent, driven by robust demand for IoT devices, motherboards and high-resolution displays for casino slot machines and medical equipment, said Mill Chang (張家豪), president of Advantech’s embedded IoT division.

Over the next three years, Europe is expected to contribute 25 percent to revenue, up from last year’s 17 percent, Chang said.

Advantech said it plans to expand its sales channel and sales workforce this year as well as set up new ventures in Spain, Russia, Vietnam and Turkey to support future growth.

Meanwhile, the company's combined sales for the first two months of the year rose 16.24 percent year-on-year to NT$6.97 billion, according to a company statement.

Strong growth from the US and Europe was offset by weakness in China due to fewer working days during Lunar New Year holiday, the company said.

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